Toll Of Member Bankruptcies Weighs On CUs

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ALEXANDRIA, Va. – Loan delinquencies and charge-offs retreated a bit in the second quarter among credit unions but member bankruptcies soared to twice that in the first quarter, weighing down profitability and posing new challenges for the movement, NCUA reported this afternoon.

“Credit unions in many areas continue to experience greater loan losses,” said NCUA Chairman Debbie Matz, particularly in states struggling with high unemployment, declining real estate values, and failing businesses. These trends are also having a sever impact on many credit union members. As their debts become overwhelming, members who are dealing with job losses and foreclosures are now much more likely to file for bankruptcy.”

The number of members filing for bankruptcy in the second quarter was twice that in the first quarter, and is well on pace to exceed last year’s decade-high, NCUA reported.

As a result, credit union profitability continued to suffer in the second quarter, with return-on-average assets for the industry falling from 0.47% for the first quarter, to 0.35% for the second quarter–and 0.41% for the first six months of the year.

Mid-year data also showed that share growth slowed from an 11% annualized rate for the first quarter to less than 1% for the second quarter. Loan growth stagnated in the second quarter to almost zero.

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